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MBIA-Vallejo, Innkeepers, UniCredit, General Growth, Chemtura: Bankruptcy
MBIA Inc.’s municipal-bond insurance unit is asking a bankruptcy court judge to order Vallejo, California, to make good on promises to pay investors in case of default by using money from vehicle registrations.
Debtor protection doesn’t pre-empt a state law that requires the use of the license fees to pay off city debts, National Public Finance Guarantee Corp. said in a motion filed Aug. 10 with U.S. Bankruptcy Judge Michael McManus in Sacramento. The income derived from the registration payments was used as a type of secondary pledge to back a $4.8 million bond issue in 1999.
The community of 115,000 on the northern edge of San Francisco Bay sought Chapter 9 bankruptcy protection in May 2008 after it failed to persuade labor unions to accept salary concessions as the recession began cutting into municipal tax collections nationwide. Chapter 9 of the U.S. Bankruptcy Code lets cities and towns reorganize rather than liquidate.
The city sold $4.8 million of “certificates of participation” in 1999 to build a fire station and finance improvements on six others. In May last year, the city stopped making payments to bondholders, a default allowed under bankruptcy protection. National said it has paid more than $200,000 in resulting claims filed by investors.
Under California law, if there is a default on bonds backed by the fees, the state controller must turn the city’s portion of the money over to investors through a trustee. Vallejo contends that while in bankruptcy, it doesn’t have to make payments to bondholders or divert the funds.
The Vallejo case is In re City of Vallejo, 08-26813, U.S. Bankruptcy Court, Eastern District of California (Sacramento).
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New Filings
Caribbean Petroleum Seeks Bankruptcy After Explosion
Caribbean Petroleum Corp., operator of the only privately owned deep-water dock in San Juan Harbor, Puerto Rico, sought bankruptcy protection after a worksite explosion.
The closely held company cited debts of $500 million to $1 billion in the Chapter 11 filing in Wilmington, Delaware, yesterday. Caribbean Petroleum has assets of $100 million to $500 million, according to the filing.
An explosion occurred Oct. 23 when a vapor cloud, which had formed as a tank was being filled with gasoline from a ship docked in the San Juan Harbor, ignited, according to the U.S. Chemical Safety Board, which is investigating the incident. The U.S. Environmental Protection Agency ordered the company to clean up the site.
Banco Popular de Puerto Rico agreed to provide $10 million of debtor-in-possession financing to Caribbean Petroleum, giving it top priority on the money among creditors.
Credit Suisse Group AG is listed among Caribbean Petroleum’s 30 biggest creditors, holding a $2.6 million loan.
The case is In re Caribbean Petroleum Corp. 10-12553. U.S. Bankruptcy Court, District of Delaware (Wilmington).
Street Realty Companies File for Bankruptcy Protection
317 West 35th Street Realty LLC and affiliate 319 West 35th Street Realty LLC, filed for bankruptcy protection yesterday in Manhattan.
The two listed assets and liabilities in the range of $1 million to $10 million, court files showed. Both of the companies listed as their largest unsecured creditor Florida Estates, of Salford, England, holding a claim of $4.375 million arising from a loan.
The cases are 317 West 35th Street Realty LLC, 10-14324, U.S. Bankruptcy Court, Southern District of New York (Manhattan); and 319 West 35th Street Realty LLC, 10-14325, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Updates
Innkeepers Holders Want Probe of Apollo, Lehman Plans
Innkeepers USA Trust’s preferred shareholders want an investigation of plans by Apollo Investment Corp. and Lehman Brothers Holdings Inc. to reorganize the bankrupt chain of hotels, saying the proposal is unfair to creditors and shareholders.
Lehman, which helped Apollo finance the 2007 buyout of Innkeepers with a $1.2 billion loan, said last month it will lend Innkeepers $17.5 million to help it restructure. The deal would give Lehman all the hotel company’s stock, which it would split with Apollo, squeezing out other creditors and investors, a committee of preferred holders said in a court filing yesterday.
The group is made up of Plainfield Asset Management LLC, Esopus Creek Advisors LLC and Brencourt Advisors LLC. impression that no equity was left for shareholders.
Richard Peteka, Apollo’s chief financial officer, didn’t return a call seeking comment. Lehman Chief Executive Officer Bryan Marsal said “the proposed transaction is good for the Lehman estate and makes sense for the Innkeepers estate.”
The cases are In re Lehman Brothers Holdings Inc., 08- 13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan) and In re Innkeepers USA LP, 10-13794, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
UniCredit Probed by Madoff Trustee for Legal Claims
A UniCredit SpA unit that invested $1.1 billion of client money in Bernard Madoff “feeder funds” is being probed for possible legal claims by the liquidator for the conman’s business.
An ex-employee of Pioneer Alternative Investment Management in Dublin should be forced to give testimony about the unit’s internal examinations of the funds, trustee Irving Picard said in filings Aug. 11 in U.S. Bankruptcy Court in New York.
The testimony would assist Picard’s “investigation of the role that Pioneer and other third parties may have played in connection with the affairs of” Madoff’s company, the trustee’s lawyer, Marc Hirschfield, said in the filing. Picard asked U.S. Bankruptcy Judge Burton Lifland to request an order from the High Court in London forcing testimony from the former Pioneer employee who lives in the city, according to the filing.
Picard has sued feeder funds and Madoff family members for the return of about $15 billion in fake profit from the fraud.
Renato Vichi, a spokesman for Milan-based UniCredit, couldn’t be reached by phone and didn’t immediately return an e- mail seeking comment.
The Madoff bankruptcy case is In re Bernard L. Madoff Investment Securities LLC, 09-11893, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Hughes Heirs Object to General Growth Bankruptcy Plan
The heirs of Howard Hughes moved to block General Growth Properties Inc.’s plan to exit bankruptcy, saying in an Aug. 11 court filing that the second-largest U.S. mall operator is discriminating against them because they wouldn’t receive the same recovery as the company’s creditors or shareholders.
General Growth, based in Chicago, is scheduled to go to court next week to ask Judge Allan Gropper in U.S. Bankruptcy Court in Manhattan to allow its creditors to begin voting on the plan. The company seeks to exit bankruptcy by October.
The Hughes heirs were among several parties involved in the bankruptcy case that filed objections to the plan and asked Gropper to order changes. They included the committee representing unsecured creditors, Eurohypo AG and Halcyon Asset Management LLC.
Creditors oppose in part General Growth’s proposal for reinstating debt, including $1.35 billion in so-called Rouse bonds, when it exits bankruptcy instead of paying holders in cash.
The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Chemtura Proposes Pricing on $300 Million Exit Loan
Chemtura Corp., the plastic-additives maker, offered initial pricing guidance on the $300 million term loan it is seeking to exit bankruptcy court protection, according to a person familiar with the negotiations.
Chemtura won court approval Aug. 9 from U.S. Bankruptcy Judge Robert Gerber in Manhattan to enter into an exit financing agreement.
Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Barclays Plc and Goldman Sachs Group Inc. are arranging the six- year debt with an interest rate 4 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, the rate banks charge to lend to each other, will have a 1.5 percent floor, the person said.
Chemtura is proposing to sell the loan at 98.5 cents to 99 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield for investors.
The financing also includes a $275 million asset-based revolving credit line due in five years, the person said.
The case is In re Chemtura Corp., 09-11233, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Briefly Noted
Orleans Homebuilders Files Plan to Cut Debt by Half
Orleans Homebuilders Inc., the 92-year-old Bensalem, Pennsylvania-based homebuilder, filed a Chapter 11 reorganization plan that it said will cut the company’s debt by about half to less than $200 million.
The plan doesn’t provide for distributions to shareholders, the company said yesterday in a statement distributed by PR Newswire.
The company listed assets of about $440 million and debt of about $499 million as of Dec. 31, according to a statement filed March 1, the day it sought bankruptcy protection. The builder sought bankruptcy after failing to win the unanimous consent required from its 17 lenders to extend the maturity of a $350 million loan.
The case is In re Orleans Homebuilders Inc., 10-10684, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Shane Co., the Colorado-based jewelry retailer that sought bankruptcy protection last year, filed its reorganization plan. Shane, which operates 20 stores in markets including San Francisco and Atlanta, will fully repay lenders whose claims are backed by assets and continue in operation with its current management team, according to the outline of the plan filed yesterday in U.S. Bankruptcy Court in Denver. Shane’s liabilities totaled $112.6 million as of January. The closely held company, founded in 1971, sought Chapter 11 protection from creditors in January 2009 as the recession curbed jewelry purchases by consumers.
The case is In re Shane Co., 09-10367, U.S. Bankruptcy Court, District of Colorado (Denver).
Centaur LLC, the marine construction company, won approval from the U.S. Bankruptcy Court in Wilmington, Delaware, to shorten the amount of time in which it may give notice of the marketing and auction of its equity interests. Notice will be given on the day the reorganization plan takes effect, according to court papers. The order signed by U.S. Bankruptcy Judge Kevin J. Carey also scheduled a hearing for Aug. 2 where Centaur will seek to schedule an auction, approve bidding procedures and the purchase agreement for the assets of unit Centaur Pennsylvania LLC. Centaur LLC and its units will seek approval of the reorganization plan at the hearing.
The case is In re Centaur, LLC, 10-10799, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Discount Sale
AIG Lender Sale Price Said to Be $130 Million in Fortress Deal
American International Group Inc. agreed to sell its consumer lender for less than 1 percent of the unit’s $20 billion in assets to avoid the possibility that the business would sap U.S. bailout funds, said three people with knowledge of the transaction.
Fortress Investment Group LLC will pay about $130 million for an 80 percent stake of American General Finance Inc., said the people, who declined to be identified because deal terms aren’t public. AIG will retain 20 percent. Divesting the lender and its $17 billion in debt removes the risk that the U.S. would have to pump more funds to maintain the parent’s credit rating, said two of the people.
The U.S. government, majority owner of AIG after rescuing the insurer in 2008, is working on a plan to exit its stake in the company while leaving the firm with an A credit rating or better to attract customers and investors.
AIG will book a pretax loss of about $1.9 billion on the deal, according to a filing yesterday from the New York-based insurer, which previously valued the unit at about $2.4 billion. The Fortress deal may be completed by the end of March, the firms said.
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Distressed Casinos
Christie Has Plan to Rescue Atlantic City Casinos
Chris Christie, New Jersey’s Republican governor, has a plan to reverse Atlantic City’s fortunes, plagued by bankruptcies this year and last, as the its casinos face increasing competition from gambling in other states.
Six of New Jersey’s 11 operating casinos have been through bankruptcy or restructuring in the past year. Betting revenue tumbled 25 percent from 2006 to 2009. Cash-strapped gambling houses have postponed renovations, and new development has stalled.
Christie proposed last month carving a state-controlled tourism district around the casinos, to oversee policing and boardwalk development. His plan includes a proposal for rescuing the project called the Revel, which Morgan Stanley began developing as the biggest casino resort in Atlantic City and walked away from in April as a result of the credit crunch, recession, competition from nearby states and record drops in gambling revenue. Bloomberg Businessweek reports more about the Revel in its Aug. 16 issue.
Christie’s plan, most of which needs state lawmakers’ approval, would stop the siphoning of $30 million in casino taxes to racetracks and, he says, call for little new state spending. For more about Atlantic City and Christie’s plan, click here.
To contact the reporter on this story: Carla Main in New Jersey at Cmain2@bloomberg.net.
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